(Ch antomepeeluig

Ag4e4 ate demamd fquilibuium 0ulput

A4g4acte demand he tplal amust e Gqrrdk
dtrmandedl n he LCAmOy-
AD CtTGt NX |
whest, AD= Aqa ate demand
C Qbod demanded fr Censuumption
I- qerds dtmarnded frr nvestrment
Geds domanaded by Gmet
NX = O-ords olousnannd ad_as Net yns (x-M)
At Equilbsiuw
Guanhit uput= uantiliu AScmandud
Phodinrd
(OR
YAD
OR
Y t I+Gt NX

Omplannd nvemtoy TU) when unexpiluy he salus el

IU Y- AD theh, he wnsold 2oods
wwih Lt a unplan nud
ahtu IU= Unplanned Inveuhzry
Învunkoa
Y Guamty a ukut pnoducsol
AD Guankuy dsamaudsd
h could be turo iuaties, Unplannd Tnvestey Disin 2st
m e n

YAD [IU 20] 0 Y AD TUO

nth cast meadiu to etain m thu Lask, odu to eah
eauilibmuwm, ms wuu utaim e4uilihium, u e f i m
bak on predu o adaitve ull uhilie te
invesmtits
-AD hat y = AD
npand Inventu Tnveamemt Invnoies Armn dorsn
 Date
The onMphomwachion Agazagate demard.

he ulahionlhip betweun coumptton income U deuibe

by Hhe eniuupticn fumahion

Consumptiom tunchion
e ousume that conAumphion demand T wiHh h e level el
nwwme nwme ConSuwpt" 1)

0 c
eu Lovs ump
when income u
neu C AutommAUS COnAuMmpt 3.
Cens ume

lsgina ppeuiily
Y = inteme
(MPO)
C=Cens umpt" fnt
e
hen
When inceme(Y) 0 then,

Auomomaus consump
AD ADE Y
D A+ Y

AD

A C CtY

Y w
The vaiable C the Inttxceph, Aupusnk the Luvd of
 Date
Page

_consumpion when inwme u 3uD

7The slope ef cemsuunphen pumion iu MPC)

MAYgLnapraptuuuly
to conume

he Marqiua Propenuiy o temsuML (MP) u he inunae

m comkumphien_pet unlt ih tula m ÍnLeme)
MPC AC
) AY J

toY dallan IeLQLL m imtone, he l e l LoAkmpt"

ie byC
AY

AC e AC

2fox t c 0.4, htntor weuyfLintuase m iuuewm

Conswmpt isesb 10 Cunk.
1&0 COwts
ie 01 4y f1 AC=?
AC
AY
0.q- AC > 0.4 - AC
09$X lo0 Cenk

0 cnk AC

nsu Case, he MPC t4 lk Hhan 1, which mples tal

cut o a dallau uinua mintome Only a dmtion, C
put Dnconumpl
 Date
Page-
T:CoMAwmpt Sava

ALMme eithea &peut oy gavd

2mcmme MA ptmt em_nsumpt is Saved
P:0 S y-C
Con Surmet
abave Lauation is caled he budgt cmsthan

Suwbatitube he comsumpt-fundion iutn thebudg

conutraint eloshe savLngfunuhon.
As ve Lnma C C+U Y
S y-c
S Y-/C+Y)

S Y-cY
- 1-)
Sauug
umchon. 19mes

fuLo because the Maqual paptnity to taue.[MPS), s=

p o i v emH words saungs uuases as
InLone ises ie y s
MPS[) 1-MPc MPS+MPt-1

Suppose MCc u 0.9 meaningad 90 ane out of_

LAah Aa dolla intome u COns d
) c 0.9 AY =$L
C = AC 0. 0.9 AC 0.9-AC
AY 1
e 0 Cenk AC
 94 he Jmouase un SAng
pr u i
unmiase un n come Date
Page.

0., meauina
Ten He manaAua propemily to saves,
exha d a l a
10 tuuk e eah
u
imovne u SAvd
AC 0 cents AY-$L e- 0.9
MPs+ MPC=1

s t 011
4 -01
01 10 cts
MPS( ) ASsavuq

01= AS
AYinwme
Maauua 0 1 AS > lo Cuns
Prpesd
Cave AS= lo ceus|

Consumptioin, Aggegade demand, and

AutonDmouSsndimq

We haue tprificd cnt tempontnt o nggsugade dema.mal

COnduuption demamd k ik Unk fo mlome

Nou we add investmtut, qat Sptaueling taxL, auuol

-hgntroelt o Dul mdal.

atu weassumed f h t Mwmein that each ii auncmgua

dtesmined oukide he modil spcipeally
assumudo be indapuudeud of ineme

HesL We uLt asume ha esnauut y 1, Gort

isp esjabl6 ncome ncame hak is fer conuryt pupeiL
aft the diduchom all taxes additim o
aul he ranya paymen Date.
Page.

Speuoluag u Gtaxes a TA zansfer a TR ner

epotw Ake NX

Cansup nw depeuds n_dicposable äcomes

C+ c YD
CtcY+TR -TA)

A qawgate demand uhe Sum he _consumptien-fnchan

Investment, qeu: Pptnding 4met tepmk..
lonhnuMg astume hat the gaut sct ereign tale
AL exaginouu
AD CtI+ Gt NX
C+ <(y+ TR- TA+T+G+ NX

AD At cY
huton motus 9pugate demand

Pants4agghtgate dunaud, A= C-cTATR)+ T+ +NA

is isndupendent al the luuel 4 income a auttmmous.

Gut agggate demand aluo Lupnd mtht lead e_nome

inuusitt he leuel e ineme bleauue conkuupt
Aemaud dncxtasusnhincorme

The aggHlgate demand 9chcdule oktained by adlii

vtically) e demands fo censuunpl", invesdnut, ge
Spmding, net tsperk at tach leel nLemt
 Date
Page

the Bnome lwelY

the l u l af a491gade dmauo
ADe AD Y
ADA
LUSO
AD-A+cY
AD,T
IUO
A
-cT-TRJ-

-TA-TR
us

ntu quaph, blue uestpudut he contunp cuh

imtucuptie auosnonmaus comuap,Casn bataken 0ut
ind Qut h4 putti intoint_a 0 eCc(TA-TR)eo
eTA-IR)

i 49slate olenanud cuve by addi wqd

mt Apark ntuuph it ounhtoamus yau o
Aatsat_dnand caanLe find out putlinn
OLS , ie D:A+ Y > AD A +clo)>AD A
 Sailibaiun income output

oharackaistic o au A int ú that i dividus h

QLajpl Inh h20 eual_plraiw
AD-y

tuilibrium

29a

Miome, bulfauar

bu toHtn,i w plat amy pt onn 4 ine that fh0

at hari,mtnl Aihnuviuhical siantt it AD-Y
n a he pt-Eeguiliiun pt The povn belos
Y s u podinm wuecuput leu Ham hu damaud4
u c a e cae t fim uU mak uke o Unplamd
hvtutry. TUKo tabtaun ejuil'bhjuu
paim ab Yo u potion LthuHe Culpd
4met thom h duaanda, un tuiu cassfim Luild c u
DHth peduct" h_atau euilhiuun TU707

VTht fLk ALilsium utput

ailibalum Corldition im the 70edt maseut
A y= AD
as, ApEA+eY) : + cY
 denated by 1,
Y-eY fem)
Y1--A
Y L()
1-c

T the leuel ap utput (Y) a fwndio oMfe) te)

OLuhnonm0us pending A)

A Gixu
Htignes MPc|(e,0) Lowes Md2(,-0.3)
steepe AD uve Hatter AD cuve

tovwe Y
ghe A Y
AD AD
AD-Y.

-AD=A+Y
AD +C
A A
y

M/C c Giveu
Lowwe A

Lasan mlesup malln Inteucep

 Lowe Y Date
Page-
AD
AD-Y zAD=Y=
AD-AtY

AD A+eY
A

Twus, the 4uiltbuium luel utput higher,the lakge

Hne MPCte)auo theiuiahe the level a ccan ouuteemas
Eptaading(A teY. Mic A

Lenilk au eaily vesifies uung thc femula te

he equiliskium Jue oincene.
Y

we cam ilale change m auhpuf a thanngts m autanomeus

punding tsugh
AY- LAA

avi TMvestment|:
meilib iuwm, plauud investmeut EsaLals taviug.
eT-S
T u conditiom oppliec oulyt o an econamy n uush
the h_Mo qvenmiut fetign Hrade
ADtI
 equaliy ÍnveidmuntE tam b e u
bthwttn lavng
dirttfom mational in~cme acc0untung
p 4 Sincein tome h utus cpeut a SavedY= Cts]

)Hep2 ma tuwo s t madel, laD= Ct

tep 3 Atcquutbium, Y AD

3 ie imude ovd aign tad.e. n He ainauyeii, tn,

e p 1 omecan_cittes be spent,tavcd,0 paid m
taxesY C+SHTATR

ep motou LLc model AD Ct Tt G NX

hcp AL ailibmum
-AD
t ctTA- TRLtT tG+NX
S+(Ta-Tk-4)-NX I

Invellme ivade tauungs S)+Caut budgtb

gurpus
TA-TAG) -
(N X
Kats thas uung alhebra, omt ptople pee aHalk
ndeamm eAaeran cceny

19mVeAtnut the kove tom at ul be planta

 Page.

enex ueas Corop

The soALLc Cem invzLtmul -

Con Savtd bu Indlividuals (s).
Con t ee 1 ei dax collestios nut a gnt
épendng TA-1R-G)
Net Cemimpeated fenm alemad IM-x)

(VT)| MUIHiplies
4 AAD = AA t cAA +c'A c'AA+

S +hre Covwmon fator u )

1-
mm.mm

4D= AA
I-

A auibiiul,
Y-AD
AY A AD
a4, AAD= AA

AY, AA

AY.
AA

mulhplek
 Tu uutiple Callud the muliplie
1-c
* Te mulhplicn u thc antu ky s h tauulhnun0upit
Charycswhan autmiou_a2qtyale demaudunttLasee

Htiutin Apreifie caseonilang dhe ga pcclor ftaty sade

ae deas he ouutiplie

-e

Ratiomp beduun MaaqLnapmapenits oceMRUAME

mulliptO

1-
e asgA he ma4 JAa DptAasts ncoMl AMAe
laaata ke onuukipAie

Did ulatiem ghip loettyeen MPC muliplier

)
ou 1 -
Hioh MeC 0-8)
laraxrachionetan addGhomal dollas o incomt

Aqt nducedJncuase m dunmaud

eoM
Mltpbe
Cast2 Low MPC 02)

Cmalukfachon of an additiamal dollar

intome wiu be comsuumed

Small indusdmcuale m demaad

heutox m thu Cast . u)_

CoveuAment Aedar
aa-i &Lctimm, Lwe_ax concekned uith the way n slaicA
g0u pehases,taxea, and hanpert aHet he eguilibnum
eu ointome
stol
Disposable ntome

2t in the ma inome aulable pemdinq by aausehelds

t h u us couuik sinone plushanehus inuctaxes

Y+TR-TA

tul poti tu paliey te om w i t andto

eut o opd puutla.ayes, he lewel of hausou 4 t
ox ucuusl

mptioma
 DaTe.
Page

Gm puahau a tontaunt ammu 4

CAt-ut mau a tontant anauut bantuu TL
G nmpedes a parepei papoztional uncome-tax, tolleetna
a frouhion, inowne tne fonm ol taxe
+ax rate

G=G TR=TR TA ty

Nuo congumeuuncion caln be untcu as

C Ct Y
CE t eY-TA+TR)
CEt_(y-AY+TR)

t e(l-t)YtTR
tTR el1-t)Y
ouitpejable
Nete2MfC out o ntorme senains

MPC ut b n come u nauw cll-t),usheue-t)&he

ahion_ewnco2.e afty taxe

AD +T+ G+ NX.
TK (1-4)Y+I+ G+NK
i t R +Tt G+ NX) e(1-)Y
At -t)Y
whurACt TR T+qt Nx)